Coronavirus poised to drive more demand for ICF services at CDC

All eyes are on the Centers for Disease Control and Prevention amid that agency's response to the ongoing coronavirus outbreak and preparations for a possible global pandemic, which also involves communications with the public.

CDC is part of the Health and Human Services Department, the latter of which is the largest federal client of global technology consultant ICF. The company already works on communication and messaging programs with CDC to raise awareness surrounding smoking, opioid abuse, vaping and HIV/AIDS.

During ICF's fourth quarter earnings call Thursday, CEO John Wasson said the company is doing same with CDC regarding the coronavirus situation and that demand is likely to accelerate in the short term.

“(Communications) has been a key growth driver for us and a core part of our public health business,” Wasson said. “One of our largest contracts is north of $100 million contract to support anti-smoking with teens and tweens. So these opportunities can be quite material, $10 million, $15 million or $20 million of potential revenue on these kinds of public health initiatives over time.”

But given the expectations of a ramp up, will there be significant shifts of funds away from ICF’s current health contracts to support the coronavirus messaging efforts?

“I think our general experience is that that will not be the case. I certain don’t have any expectation of that,” Wasson said.

A second key item of analyst inquiry was ICF's $255 million acquisition of Incentive Technology Group that closed at the end of January to bolster the buyer's digital transformation chops for federal agencies and ride the wave of IT modernization in government.

Now comes the part of integration that includes identifying new opportunities neither ICF or ITG could pursue on their own, plus those seen as having a higher chance to win now.

Wasson told investors the company is working on both of those items and hence seeing what new customers it can reach with ITG in tow.

“We are coming up with some initial views of that, obviously those will need to go into capture and will be longer-term opportunities, but I’m quite confident those exist,” Wasson said.

ITG in turn will look to apply ICF’s domain knowledge and contract vehicle portfolio for pursuits already in the works.

“I fully expect we’ll be announcing material new awards here in the next quarter or two on the IT modernization front,” Wasson said to analysts, along with “some very quick synergies” there.

On the financial front, ICF posted revenue growth of 10.5 percent last year to $1.48 and also registered an 8.5-percent increase to $129.6 million in EBITDA (earnings before interest, taxes, depreciation and amortization).

Sales to the federal government represented 38 percent of total revenue last year versus 41 percent in 2018. In addition, the company booked $1.52 billion in contract awards last year for a book-to-bill ratio of 1.03 to indicate the backlog is growing faster than sales are being realized.

Regarding this year, ICF’s guidance sees 10-percent revenue growth to $1.6 billion-$1.65 billion and a 16-percent increase in EBITDA to $145 million-$155 million.

A third key item of analyst interest on the conference call was the realignment of executive roles announced alongside the financial results. Bettina Welsh will become ICF’s next chief financial officer Saturday, while current CFO James Morgan will start a newly-created position of chief of business operations.

Morgan’s new responsibilities involve leading the company’s new acquisition integration office to steer the onboarding of ITG into ICF. The idea is to let Wasson continue much of the same external-facing work he did as chief operating officer prior to his promotion to CEO in October.

“When I became CEO, I thought it was critically important for me to be externally focused on a strategy, trends in our market, our clients, our growth opportunities,” he said. “I really felt that we needed to create a new position and have somebody to really focus on those corporate functions that I think are going to be quite critical to our continued growth.”